The name Elon Musk has been closely associated with the short message service Twitter for years. Whenever the Tesla founder and self-made billionaire is overcome by his pronounced need to communicate, he opens the app. Not infrequently, his curious Twitter escapades lacked any basis. The tweet from 2018, when Musk announced that he would take the e-car company Tesla off the stock exchange if its share price reaches certain levels, is memorable. Or also his zigzag tweets on cryptocurrencies, which always result in price capers.
Apparently, the 51-year-old, who himself counts more than 100 million followers, has enjoyed the app so much in recent years that he began investing in Twitter earlier this year. First it was a financial investment, shortly after Musk was offered a seat on the board of directors, followed in turn by a takeover bid, which after brief squabbles with the Twitter board resulted in an amicable offer of USD 54.20 per share at the end of April. But Musk would not be Musk if that were the end of the story. The real adventure began only afterwards and continues to this day. At the beginning of July, Musk surprisingly canceled the transaction with a total value of around USD 44 billion.
The reason for the cancellation of the agreement was that, in Musk's opinion, the social media platform had broken the takeover agreement in several points. The accusation is of "false and misleading" statements, referring in particular to the information on spam or fake accounts on Twitter. Therefore, the SpaceX founder exercised his right to abandon the purchase project. In doing so, however, Musk did the math without the host, i.e. Twitter. The company's management immediately announced legal means to pressure the eccentric multi-billionaire to complete the purchase.
Meanwhile, the two parties have reached the point where they are suing each other. Twitter is seeking to have a court in the U.S. state of Delaware force Musk into the deal. Musk, in turn, wants to cancel the purchase, and to do so without having to pay a USD 1 billion penalty. Musk is currently getting backing from two sides: on the one hand, former Disney CEO Bob Iger has disclosed that in 2016, when the entertainment company was considering an acquisition of Twitter, it was determined that a "significant portion" of Twitter users were "not genuine." On the other hand, the former head of security of the short messaging service Peiter Zatko, who accused the company of having a disastrous security culture, received USD 7 million after leaving Twitter. With that, Zatko has agreed not to speak publicly about his work. Musk cites this as another reason not to consummate the purchase, saying Twitter violated the acquisition agreement by doing so. Be that as it may, clarity could soon prevail: The court case is scheduled to begin on October 17.
The back-and-forth between Musk and Twitter is not without impact on the ongoing business. In the already weakening digital advertising market, uncertainty about the deal worried advertisers. This led Twitter to report a net loss of USD 270 million for the second quarter. This compares with a profit of USD 65.6 million a year earlier. Quarterly revenue fell slightly from USD 1.19 billion to USD 1.18 billion. With its figures, Twitter clearly missed analysts' expectations.
The stock has recently been on a recovery course after the price slide in the wake of the merger cancellation. After a short but significant countermovement, the share price has now been oscillating up and down between USD 38 and USD 45 since the end of July. In addition to the volatile earnings development of the company, in which no clear trend can be identified for years (see chart), this standstill also fits in very well with the analysts' assessment. Thus, the consensus rating is currently "Hold" with a price target of USD 41, i.e. the current level. This could be a perfect scenario for a Barrier Reverse Convertible (BRC), as this product already promises a return in the event of stagnating or moderately falling prices. Leonteq has launched two new Single Softacallable BRCs: The Swiss franc version offers a maximum return of 14.00% p.a., in USD even 17.00% p.a. are possible within the maximum term of 12 months. The double-digit percentage returns are hedged with comfortable risk buffers of 45% each. Twitter shares were last at such a low level in the Corona crash in 2020.
The chance of winning can still be increased: If one adds the social media platform Meta to Twitter, a coupon of 19.00% p.a. is possible with an identical risk buffer of 45%. The term of the CHF-denominated product also ends after one year at the latest. The first soft callable observation date takes place after 6 months.
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